Air Traffic Control: Bureaucracy and Unions

2016-05-12

CHRIS EDWARDS, CATO INSTITUTE

For more than a century, America has been the global leader of the aviation industry. But these days, the government-run parts of the industry are inefficient and falling behind, including airports, security screening, and air traffic control (ATC). International experience shows that these activities can be better run outside of government bureaucracies.

House Transportation Committee chairman Bill Shuster introduced legislation to shake-up our moribund ATC system and move it out of the government. Shuster modeled his bill on highly successful Canadian reforms that established ATC as a self-funded nonprofit corporation, Nav Canada. For America, Canadian-style reforms could reduce airspace congestion, improve efficiency, benefit the environment, and save taxpayer money.

Such reforms should appeal to conservatives and Republicans, but there is resistance. Some Republicans are carrying water for the general aviation industry, which opposes the bill for apparently short-sighted financial reasons. And some conservative wonks oppose the bill because it does not reform the labor union structure of the ATC workforce. That objection is also short-sighted.

Economist Diana Furchtgott-Roth opposes Shuster’s legislation over labor issues. Diana is an expert on labor unions, but she is letting the perfect be the enemy of the good here. Our ATC system—run by the Federal Aviation Administration (FAA)—is being held back by government bureaucracy and congressional micromanagement, not so much by unionization.

The reason why the FAA has a long history of cost overruns, mismanaged technology projects, and other failures is the bad incentive structure that exists within all federal agencies. The more complex the task, the more that government bureaucracies fail, and ATC is becoming increasingly complex. Bob Poole has described the FAA’s bureaucracy problems in this study, and I have discussed federal bureaucratic failure more generally in this study.

Marc Scribner at CEI does a fantastic job of countering Diana’s arguments, and Bill Shuster responds to Diana’s labor-related complaints here. Personally, I would repeal “collective bargaining” (monopoly unionism) completely in the public and private sectors, for both economic and freedom reasons. But until that happens, I would take a private-sector unionized company any day over a unionized federal bureaucracy. Diana would apparently prefer the latter, which I find perplexing.

Private ATC managers would be more likely to push back against unreasonable union demands than government managers. And even as a nonprofit entity, a self-funded and unsubsidized ATC company would have a bottom line to meet. In Canada’s case, that structure has driven major improvements in productivity and created perhaps the best ATC system in the world. Nav Canada has more freedom to innovate than the FAA, and it has a strong incentive to do so because foreign sales of its technologies help the company meet its bottom line.

Nav Canada has won three International Air Transport Association “Eagle” Awards as the world’s best ATC provider. The system is handling 50 percent more traffic than before privatization, but with 30 percent fewer employees. And, as Marc Scribner notes, “Since the Canadian reforms 20 years ago, the fees charged to aircraft operators are now more than 30 percent lower than the taxes they replaced.”

And that progress in Canada was achieved with a unionized workforce and collective bargaining. In the long run, I favor freedom of association for ATC workers, but the top priority today is to overhaul the institutional structure of the system and bring in private management.

Kudos to Marc and Bob, who both deserve “Eagle” awards for their top-class ATC analyses.

Chris Edwards is the director of tax policy studies at the CATO Institute and editor of www.DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.

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